Aetna’s ACA Enrollees Drag On Healthy Government Business

Last November, UnitedHealth Group’s CEO Stephen Hemsley said his company was losing money on subscribers signed up through the Affordable Care Act’s (ACA) healthcare insurance exchanges. He said the company made a mistake by participating in the exchanges before fully understanding the financial risks.

Now, Mark Bertolini, the chairman of Aetna, says his company’s insurance offerings under the ACA “remained unprofitable in 2015.” But, he added, growth from other government lines of business helped boost overall company profits nearly 40% in the fourth quarter. “Our government business saw strong growth in membership and premiums, as well as improved underwriting margins, ” said company officials on February 1, 2016.

Bertolini is probably happy to maintain the ACA exchange “loss leader” to gain access to more business as well as keep federal regulators happy as they consider Aetna’s bid to acquire rival Humana. If that $37 billion deal is approved, Aetna is expected to be an even bigger player in the Medicare and Medicaid business.

The subsidized individual business of about 1 million members is less than 5% of Aetna’s total membership, or more than 23.5 million, according to a Forbes article. The company said it is seeing solid growth in other lines of business, including its Medicare and Medicaid plans, which helped revenues in Aetna’s government business rise 8.3% to $5.8 billion. The division’s revenue was about $22.9 billion for 2015, which represents a year-over-year increase of about 9.1%.

The company added nearly 70, 000 Medicaid enrollees in the fourth quarter due, in part, to more states expanding the program with the help of federal dollars available under the ACA. The company now has more than 1.5 million subscribers in its Medicaid plans.

Like UnitedHealth, Aetna has expressed concern that the individual exchange members have been using more medical resources than those members in other enrollment categories. Also, about 25% of the company’s individual business members have been enrolled outside open enrollment period and belong to special enrollment category. UnitedHealth’s CEO Hemsley noted that special enrollment patients utilized 20% more medical services than those enrolled during the enrollment period. Special enrollment rules also allow patients to move into plans when they require more medical services, thus resulting in losses for health insurance carriers.